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The Market Solution: Using
Capital Markets to Fight Poverty
Two extremes of economic mechanisms exist: the
stock market and the peer lending circle. The first
represents the financial system as we currently
know it; the second represents both an ancient
informal lending mechanism and, more recently,
the growing industry and/or social movement of
micro-finance. Jim Stanford (1999, p. 23) uses the
terms “financial economy” and “paper economy”
to refer to the financial system represented by the
stock market, or, “the huge industry that has developed around the creation, purchase, and sale of
money and other financial (or paper) assets: stocks,
bonds, loans, mortgages, mutual funds, derivatives,
foreign currency, annuities.” I refer to this system
simply as “the market,” as my focus is the use of
stock markets to channel money to the poor. The
market is perhaps known best as a means of potentially immense individual, private gain for the few
as opposed to the common good of the many. Taken
to a macro, political level, this perspective translates
as follows: “Behind the abstraction known as ‘the
markets’ lurks a set of institutions designed to maximize the wealth and power of the most privileged
group of people in the world, the creditor-rentier
class of the First World and their junior partners
in the Third.” (Doug Henwood, Wall Street: How it
Works, and for Whom, in Stanford, 1999, p. 39.)
Débats et
propositions
LISA LAWR
Researcher with HRDCs
Sector Partnerships Branch
[email protected]
1
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Interestingly, the market has recently spawned a socially-concerned
offspring, known as ethical investing, which attempts to turn market transactions to the social good.
Micro-finance, on the other hand, is a system of finance which was
developed with the express purpose of alleviating poverty through the provision of financial services (mostly credit) to those traditionally left unserved by
the financial economy, because their low financial status made them ineligible
to participate. Since its origins in India with the Grameen Bank, micro-finance
has developed into several streams with varying philosophies on service
delivery and ultimate goals. The most recent and forceful stream is commercialization, which embraces the pursuit of profit and capital markets to
support its capital needs. The intertwining of these two extremes in financial
systems, through the interactions of capital markets, ethical investing, and
micro-finance, is the focus of this paper.
Much has been written on the subject of commercialization itself, both
critically and in favour of, most of which can be coarsely divided respectively
into two camps: “welfarist” and “institutionist” (Woller et al., 1999). Welfarists
believe market-funded micro-finance obviates service to the poorest of the
poor, whereas institutionists argue that only market access can fuel the necessary expansion of services to the millions who need it. However, aside from
this discussion of the market, which tends to centre on issues of access and
functionality, there is little literature directed at breaking down the political
economy of the market itself, and in then applying this to the present-day use
of the market as an anti-poverty tool. The aim of this paper, then, is to outline the differing positions and understandings of recent uses of the market
as a tool against poverty, with the goal of providing an initial sketch of the
landscape in order to better understand each perspective.
This focus stems from my standpoint that the inherent structure of the
market and capitalist economy more generally is inseparable from the problem of widespread poverty. While outside the scope of this paper to outline
and defend, such a position is premised upon the defining features of the
market which include very high concentrations of wealth, destructive boombust cycles, capital flight, speculative gain, an inherent unsustainable growth
imperative, supportive inflationary monetary policy, etc.1 In this context, I
ask whether a larger strategic analysis regarding the participation of microfinance institutions (MFIs) in the market exists. Similarly, is a critical analysis
brought to the ethical investing movement? Do these “market solutions” to
poverty represent attempts to subvert the financial economy, to challenge it, to
build alternatives to it, or do they simply reinforce it? Should such analyses be
expected? What other avenues exist to transform the financial system?
2
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THE DEVELOPMENT OF ALTRUISTIC PROFIT
The commercialization of micro-finance, whereby MFIs access capital markets vs traditional donors for loan capital, began in 19842 and is at this time
well-entrenched in the industry, if not its driving thrust. According to Woller
et al. (1999), the drive to privatize and commercialize MFIs has now captured
the industry, a movement comparable to evangelization. The micro-finance
industry embarked upon the strategy of accessing capital markets as a means
of fuelling its recent incredible growth, with the ultimate aim of greatly
increased coverage of poor clients. Regarding the transformation in 1992
of the Bolivian PRODEM, a former non-governmental organization, into
BancoSol, the world’s first commercial bank serving the businesses of the
poor, Gonzalez-Vega et al. (1997, p. 131) comment: “What makes it different
from other micro-finance organizations is its charter as a regulated private
bank and the explicit pursuit of its altruistic mission through a profitmaximizing strategy of commercial viability.”
At the time, this was a radical, unheard-of idea in the micro-finance and
NGO sectors (Calvin, 1996).
Meanwhile, as mentioned above, certain market actors (originally credit
unions), in addition to being courted by MFIs, launched their own profitdriven pursuit of social objectives in the form of ethical investment funds.
Although most ethical funds represent corporations and are an attempt to
redress corporate irresponsibility, a fraction funnel funds to the commercialized MFIs described above. Ethical funds have grown from $40 billion in
1984 to $639 billion in 1995, to over $2 trillion today, according to a 1999 report
by the Social Investment Forum, accounting for 13% of total funds under
professional management.
PERSPECTIVES ON MARKET USE
The differences among positions regarding the use of the market towards
poverty alleviation revolve firstly around the underlying understandings or
assumptions of market dynamics; secondly, given that prior understanding,
around how to then use the market; and thirdly, upon what outcomes are
desired vis-à-vis the market itself. With regard to underlying assumptions,
the first standpoint accepts the market as is. The underlying dynamics of the
market are not challenged or questioned. Importantly, it remains unclear from
my investigation whether this acceptance is passive, based simply on a lack
of analysis in this regard, or on a more active, neoliberal-based belief that the
market is indeed the best reallocator of capital. The second standpoint views
the market as inherently unequal and, in fact, poverty-causing. Strategies for
using the market are more complex, as follows below.
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According to the first neutral or accepting view of the market, the strategy is to link or expand the market as is to the poor, using the vehicles of
micro-finance and ethical investing. There is no desired outcome with regard
to the market per se. Corresponding to the second, more critical view of the
market, the strategy remains the same, but is performed with subversive vs
neutral intent (i.e. an inherently exploitative tool is redirected towards the
interests of the poor). Again, the market stays the same. Alternatively, another
strategy of the more critical view is to use micro-finance and ethical investing as “market experiments,” with the ultimate outcome of transforming the
market itself. These vehicles are thus used with the belief that, while perhaps
not in themselves designed to fundamentally transform the market, they may
nevertheless serve to open up new, alternative space(s) in which transformation can ultimately be accomplished.3
Each strategy is viewed by its proponents as revolutionary, whether in
the sense of breaking down traditional paradigms concerning poverty and
profit (i.e. linking the market to the poor); exponentially increasing the financial coverage of poor clients; subverting an exploitative system; or confronting
and fundamentally transforming the root cause of inequality.
PRO-MARKET VIEW NO. 1: “GOING TO MARKET”
Institutionists and Ethical Investors
The perspective of accepting and using the market as is is the perspective of
the micro-finance industry generally, espoused in most of the published literature and upheld by prominent and powerful representatives of the industry
such as the World Bank, Consultative Group for the Poor (CGAP), USAID,
and ACCION (Woller et al., 1999). This position is referred to in the literature
as “institutionist,” because of its emphasis on institution-building through
financial self-sufficiency. MFIs must be financially self-sufficient (commercially viable) in order to access capital markets. Accessing capital markets is
vital and overwhelmingly positive because only such an unlimited source of
capital (vs traditional donor sources) can exponentially expand micro-finance
services, thereby significantly lessening poverty (Woller et al., 1999). Bolstering this view, the CGAP estimates the need for micro-finance capital in 2005
will be $12.5 billion and $90 billion in 2025, whereas the total micro-lending
portfolio in 1995 was $2.5 billion (CGAP, 1995b, in Woller et al., 1999). Institutionists thus maintain that a “true concern” for the poor requires attaining this
kind of scale. According to Michael Chu (1997, p. 10), president of ACCION,
a prominent MFI: “This illustrates that a social impact program that achieves
economic viability can open the doors to creative uses of the financial market.
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By cracking open those doors, this sector can access the economic firepower
to extend the reach of microenterprise programs to the millions of people who
really need it.”
Indeed, it is not sufficient merely to “tap the markets.” It is necessary
to create an entirely new financial system, a separate system of sustainable
financial intermediation to serve the poor, made up of privately-funded,
large-scale, profit-seeking institutions. This process is known as “financial
deepening” (Woller et al., 1999).
Thus, a perception of scarcity and corresponding aversion to dependence upon the whims of donors, plus a drive to greatly expand micro-finance
services and/or a desire to significantly reduce poverty (the latter two not necessarily being the same) drive market access and financial self-sufficiency for
MFIs. As mentioned, linking the market to the poor is viewed as revolutionary in nature, in that traditional paradigms dichotomizing social objectives
and the pursuit of profit are eroded. Hermann Krutzfeldt, Deputy Managing
Director of Banco Sol, is excited to link Wall Street to pauper street vendors in
Bolivia via certificates of deposit, Banco Sol’s main source of funding: “This
last point is exciting, not because foreign capital comprises a significant portion of Banco Sol’s debt structure, but because it closes the conceptual link
between the world’s capital markets and the promise to pay of a street vendor
in La Paz.” (Krutzfeldt, 1997, p. 8.)
Chu (1997, p. 9) expresses a similar view: “Given the premise of economic viability, the connection between a micro-finance program which is
based on profound social objectives and the profit-driven capital markets is a
dramatic breakthrough.”
Generally speaking, the views of the ethical investing industry would
belong to this perspective as well.
Anti-Market4 View No. 1:
Subverting the Market and “Welfare Capitalism”
More critical of the market but echoing the views of micro-finance practitioners
quoted above, here direct use of the market as is to alleviate poverty – “welfare
capitalism” – is again perceived as representing a space in between traditional
“either-or” dichotomies of markets and government in poverty policy: “That
poor communities would use markets to propel revitalization contradicted
liberal orthodoxy that held capitalism responsible for the economic disparities
between the haves and have-nots, so that only an alternative governmental
distribution scheme could address poverty and its attendant problems.”
(Stoesz and Saunders,1999, p. 391.)
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5
Here, the difference lies in intent of usage, in that the existing, unequal
economic market system is subverted versus the notion of either neutral or
beneficial market expansion (as above): “In applying welfare capitalism,
advocates of the poor could exploit the very structures and processes of capitalism to alleviate poverty” (Stoesz and Saunders, 1999, p. 391).
The market-solution strategy is also somewhat attenuated in this view
by calls for caution and the conclusion that any case for welfare capitalism
should be made as a sequel, versus replacement, for public welfare which is
still needed as a foundation.
Anti-Market View No. 2: A Different Market
While not directly opposed to using capital markets to address poverty, theorists of this perspective are more hesitant, more conscious of the market as a
political and value-laden choice (vs as neutral entity), and situate the market
strategy with more complexity, with regards to neoliberalism and the state.
Because the market is viewed as systemically unequal, ethical investing
is viewed as inherently problematic, in that it participates in and thus reinforces the destructive market cycle based on speculation (Bruyn, 1987, p. 250).
Yet, the potential for structural change may still lurk in the “subtrends” of
ethical investment – the alternative businesses and structures (such as MFIs)
supported by it: “… we should then see its (social investment) subtrends
spearheading changes in the character of modern capitalism. The subtrend of
alternative investment especially questions the roots of capitalist belief as it
points toward a new path of social development within the economy” (Bruyn,
1987, p. 253).
Bruyn (1987, p. 252) says of social investment that “… if it deals wisely
with its own problems it may not only advance solutions to market speculation and corporate-government debt but also move toward altering the very
character of the market system itself.”
Alternative social business structures (including some MFIs) challenge
and replace capitalist structural dynamics such as the competitive principle
with co-operativism, as well as the need for state regulation, self-accountability,
social self-regulation, profit sharing, and social equity, all in the context of
building stronger local communities (Bruyn, 1987). Capital is removed from
the traditional control of elites and the competitive market for profit, and
redistributed to people in localities. Bruyn (1987, p. 252) is hopeful that these
admittedly small trends point to the development of a fundamentally new
system of economic exchange: “Are the new patterns of social investment
developing sufficient strength and sense of direction that they may provide
sensible alternatives to the purely profit-based patterns of finance now
threatening the security of the national economy?” (Bruyn, 1987, p. 222.)
6
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DISCUSSION
In this section, I sketch the background of the pro-market standpoint4, and
pull out some of the main issues embedded within its proponents and opponents reviewed above. Finally, I briefly put forward some alternative strategies to the “market solution,” suggested by those who view the market as the
cause of, versus solution to, poverty.
Not surprisingly, the concerns of those who most endorse the market
solution tend to be purely practical in nature (e.g. market integration, MFI
capabilities). Those more critical of the market per se raise political and
ideological-based issues, as well as questions regarding effectiveness. These
include the place of the state, individualism, the role of “market dynamics,”
and the “market mentality” or ideology. As seen above, while some critics cautiously view MFIs and ethical investing as potentialities or new spaces where
new alternatives to both the market and the traditional market-government
paradigm may develop, others reject market access outright, based on issues
of accessibility, the risk of value drift, and finally, the perception that it is the
market itself which needs to be addressed directly and at a macro level.
Situating the “Market Solution”
The view of the market as a tool of poverty alleviation holds a strong place in
neoliberal economic theory and ideology, as represented in “trickle down” and
modernization theories, and faith in the notion of “invisible hand” responses
to demand and allocation of resources. In these views, increased market activity and trade are deemed to produce more wealth, which eventually trickles
down to the poor. Similarly, poor, “developing” countries are instructed to
open their doors to free trade.
Taking the specific case of the institutionist pro-market reasoning outlined earlier, Woller et al. (1999) trace the origins of this thinking directly to
the failed experiments with Rural Development Institutions (RDIs) during the
1960s and 1970s. Third World governments and development agencies funnelled large sums of money into state-run RDIs to provide agricultural credits
to poor farmers. Due to the grant mentality fostered among clients, high overhead and transaction costs, and heavy corruption, RDIs almost universally
failed. According to institutionist literature, the biggest lesson learned from
the RDI experience was that “… the most severe deficiency of the traditional
rural financial organizations … has been their lack of institutional viability”
(Gonzalez-Vega, 1993, p. 23-34, in Woller et al., 1999, p. 37). The RDI experience
left its imprint on the development movement generally, leading eventually to
the institutionist viewpoint.
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Placing “Market Solutions”
Joel Lebossé distinguishes between two overarching positions of uses of
the market to solve poverty. The first is to make the marginalized “bankable” again, the second is to transform the notion of “bankable” altogether.
The former is described as working “… to create conditions that will enable
excluded borrowers to become ‘bankable’ again – or in other words, acceptable to today’s financial system” (Lebossé, 1998, p. 67). Practically, this means
reducing disqualifications of demand, or getting the poor closer to meeting
conditions of acceptability of the financial offer. The second strategy strives
change the financial offer itself, making it accessible to the demand, and to
“make social performance compatible with economic efficiency” (Lebossé,
1998, p. 67). This strategy involves new risk assessment strategies, managing transaction costs, adjusting the profitability structure and fine-tuning
the marketing strategy: “This strategy aims to demonstrate the efficiency of
a path different than that of the traditional financial system, and to influence
‘discriminatory’ banking behaviour, by demonstrating its own success”
(Lebossé, 1999, p. 67).
Lebossé’s distinction between “bankable” and “unbankable” is useful to
keep in mind during the following discussion of the wider but related issues
of the place of the state, social policy, public welfare, and critical analysis.
Practical Concerns – Institutional Capability,
Regulation and Access
As mentioned, the concerns of those most strongly endorsing the use of the
market as is (i.e. the micro-finance and ethical investing industries, generally)
are practicalities around market integration. These include both the perceived
overflow and lack of flow of capital, for MFIs and ethical investing respectively. There is concern within the micro-finance industry about its ability to
manage tremendous growth, the capacity of MFIs to successfully absorb and
manage hugely increased amounts of capital, the rate at which to do it, best
practices, etc. (The Economist, 1999; Stallings, 1999; Cerven, 1999). The emphasis is on the capabilities of MFIs themselves, as opposed to the nature of the
market per se and/or its fit with the social objectives of micro-finance.
Within the field of ethical investment, the practical problem is blocks
to capital flows. Regulatory restrictions limit ethical investment funds from
placing monies in unquoted ethical investments, and trust laws dictate that
primacy of management of ethical funds be given strictly to financial returns.
A gap is thus created between ethical investment funds and the Community
Financial Institutions (CFIs) or MFIs which channel these funds directly
into micro-enterprise (Mayo and Mullineux, 2000). CFIs, on the other hand,
currently operate in a regulatory context of “benign neglect.” As a result,
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$2.5 billion (U.K.) in ethical funds remain untapped for regeneration (Mayo
and Mullineux, 2000). A new legal and regulatory form is proposed, such as a
“high impact social investment fund model,” which would take savings from
mainstream sources, but accept a savings strategy which does not require
maximizing financial returns (Mayo and Mullineux, 2000).
Access and “Market Dynamics”
Still at the level of functionality and accessibility, “welfarist” micro-finance
practitioners shun market access based on their concern that gains in increased
breadth of micro – finance services are won at the expense of depth of service,
leaving the poorest poor unserved (Woller et al., 1999). Welfarists thus distinguish themselves from institutionists by their value belief that “true concern”
for the poor lies in serving the most marginalized of the poor, as opposed to
achieving large-scale coverage (Woller et al., 1999). This goal, they maintain, is
directly at odds with market dynamics per se. Welfarists, representative of the
micro-finance of its original and earlier stages of development, occupy a much
smaller place today on the micro-finance landscape than institutionists of the
commercialization movement.
As mentioned earlier, in order to access capital markets, MFIs must be
financially self-sufficient, replacing donations and/or subsidies with formalized banking procedures and profit-oriented business strategies. As such, MFIs
require a viable (paying) market, thus translating (sometimes extreme) socioeconomic need into market demand for paid services. Welfarists argue that
this market-based dynamic and rationale systemically excludes the most marginalized poor, such as those in rural areas where low population does not justify costs incurred, or the extremely poor who cannot afford to pay any fees.
Place of the State vs “Market Dynamics”
As discussed earlier, the emergence and popularity of market solutions to
poverty can be understood as part of a more generalized backlash against
the era of the welfare state generally and its perceived failure (Stoesz and
Saunders, 1999), and more specifically, against the marred history of heavily state-subsidized aid and squandered funds which characterized the RDI
experiments (Woller et al., 1999). In these contexts, the concept of the “market”
solving poverty is especially appealing to pro-market liberals. The diminished
or complete absence of the state is advocated, in order to let healthy market
dynamics run their natural course, efficiently and effectively.
Mendell (2000; Mendell et al., 2000) points to the largely ideological
make-up of this market vs state dichotomy, considering the state’s very active
and vital role in the so-called “free” market economy, both historically in its
very creation and presently as it undergoes deregulation and liberalization.
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On the same hand, the state has been active in the creation of many microfinance initiatives and other social finance tools, due to a complete lack of
market incentive to do so (Mendell et al., 2000, p. 22). Mendell (2000, p. 11),
however, also remarks on the potential danger of such an economic climate, in
which “… any commitment to the public good is limited to the identification
of the public good with a viable enterprise culture.” In this light, she cautions
that even state-created MFIs and related social finance “alternatives” must be
questioned along the following lines:
… the critical question is whether we are speaking of “alternatives” at all, when referring to local finance. In other words, is the
growing availability of capital at the local level merely supply-side
economic policy writ small, or does this source of capital provide
new and significant opportunities for communities and localities to engage in autonomous economic development strategies?
(Mendell, 2000, p. 11.)
Stallings (1999) similarly downplays the “market dynamic,” emphasizing
that the success of Banco Sol was due as equally to collaboration with and
personal understandings of the needs of the poor as to any “invisible hand”
mechanism of the free market. In the confrontational and heavily classist
society of Bolivia, Banco Sol was created only when a few social visionaries
recruited key powerful businessmen as figureheads, and thus were able to
change government regulations impeding the delivery of financial services to
the masses.
Individualism and “Market Mentality”
Hand in hand with the diminished role of the state is the shifting of responsibility for poverty squarely onto the individual. Moreover, especially in
developing countries, this shift can be a powerful means of instilling a new
“market realism” or rationality amongst a population (Rankin, 2000), necessary to make the “unbankable” bankable. Such a rationality holds particular dangers for women, to whom micro-finance is predominantly directed.
Katherine Rankin (2000) argues that essential to the “business” approach to
poverty lending is the formation of a social identity of the self-maximizing
entrepreneur. As such, the poor can be understood by and are consistent with
the financial sustainability of lenders, and the ideal of self-regulating markets:
“When poor women are constructed as responsible clients in this way, the
onus for development falls squarely on their shoulders, and their citizenship
manifests not through entitlement but through the ‘free exercise’ of individual
choice.” (Miller and Rose, 1990, p. 24, in Rankin, 2000 p. 19.)
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Rankin argues this is a form of subjection, as MFIs ultimately aim to
align women’s personal goals with those of economic reformers. This strategy
is all the more dangerous as it often fails to address the cultural ideologies and
institutions which constitute considerable barriers to women’s entrepreneurial capacity – such as severe social penalties if she gives up her “dependent”
status.
Seen in this light, market-funded micro-finance is not revolutionary, but
becomes instead a perfect stand-in for the devolving role of the state in governance and social programs. Most insidious, it is the ideal vehicle to catalyze
amongst the population the cultural ideal of the self-regulating market and
self-maximizing entrepreneur as legitimate and ethical entities.
Value Drift
Welfarists contend that, with ready access to commercial capital, MFIs risk losing their initial (philosophical and/or spiritually-based) vision characterized
by attention to individual clients, maximized informality, ease of access, and
egalitarian leadership, as production and lending are streamlined away from
the most destitute (Stallings, 1999; Cervens, 1999; Woller et al., 1999). Market
access imposes high expectations and pressure from investors (as opposed
to socially-oriented donors) for profitable returns. According to the welfarist
position, the increased capital so sought after by most of the micro-finance
industry to increase accessibility could effect the opposite result.
Welfarists thus argue for restraint in assuming that market liberalization
and the financial sustainability of micro-finance programs are the certain propoor strategies they are made out to be (Yaqub, 1998). If liberalized financial
markets do not behave as predicted, the poor stay underserved.
“Market Solution” an Ineffective Distraction
Jim Stanford (1999), economist with the Canadian Automotive Workers,
refutes the ethical investing and (Canadian) micro-finance solutions on the
basis that they are ineffective and that they distract from the root problem
of the market itself. According to Stanford, the Canadian CED movement,
including social finance initiatives such as VanCity, Calmeadow and the
Montreal Community Loan Association is small-scale and insignificant, and
retains all the negative features of traditional small business creation in the
capitalist market (labour-intensive, low-productivity, low-wage, high risk):
For social investment to become a true force in Canada’s economy,
it will need the economic and human capacity to undertake large,
capital-intensive, highly productive projects that could constitute
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a new leading edge of future economic development – not just a
low-cost, last-chance “fall-back” activity for communities which
have been left out of that development. (Stanford, 1999, p. 405.)
Stanford (1999) instead advocates a shift back to national corporations
(i.e. greater public sector investment) and a public venture investment system
fuelled by taxes on banks and RRSPS, Bank of Canada injections, and government and public share purchases. Stanford implicates the monetary policy
supporting the market economy, and suggests reforms to tax policy, the Bank
of Canada’s target bands for inflation and its policy of high interest rates. He
advocates for increased public investment and domestic and international
financial regulation. In the area of domestic financial regulation, Stanford
argues for (among other reforms) community reinvestment provisions on
lending institutions, an improved economic and legal environment for credit
unions, and limits on the economic importance of private asset markets. The
latter would be achieved through the influence of government policy choices
in other areas, such as social policy initiatives (Stanford, 1999). Stanford evidently sees no role for the market in poverty alleviation, but rather contends
that it is the market itself which must be contained.
CONCLUSIONS
Does the answer to poverty lie waiting in the market, or does the market create
poverty? Does it lie somewhere in between, and/or in the transformation
and creation of a new market? Does linking the market with micro-finance
initiatives and ethical funds subvert the financial system, challenge it, build
alternatives to it, or simply reinforce it? Perhaps most importantly, are these
questions being asked by the micro-finance and ethical investing industries,
which (for the most part) advocate the market as the (if not “the”) solution to
poverty. The answer to these questions lies essentially in how the underlying
principles or functioning of a capitalist market economy are understood. But
first, the question needs to be asked.
Evidently, the same “tools” of the market can be used in many ways,
toward differing ends. Therefore, it is to a large extent the perspective guiding
the tools that determines the answers to the above questions. As portrayed
in the “sketch” of the ethical investing and micro-finance landscape above,
use of the market as an anti-poverty tool can thus be part of a conservative
agenda, it can be subversive or even transformative.
As evidenced, most micro-finance and ethical fund initiatives accept
the market as is, without a critical analysis of the market per se as part of
their analysis of poverty and its causes. Lack of capital is perceived to be the
overwhelming problem for marginalized people/countries, as opposed to the
way the existing financial system is structured. Thus, the (commercialized)
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micro-finance strategy, and ethical investing generally, can be depicted as
tinkering with or tuning-up the present system in order to get missing capital
flowing to those who really need it – thus allowing microentrepreneurs to get
on with starting small businesses and eradicating poverty. Practitioners are
prepared to work with the system as is, to “play the game” of capital finance,
as opposed to acting against it or to transform it: “With the right partner,
securitization can create an alternative microenterprise financial system that
deals with capital markets, in the language of the capital markets, in a market
for which the capital markets are not suited. This is accomplished by bringing
partners together to do what they do best.” (Chu, 1997, p. 5.)
The slogan of the commercialized micro-finance industry as it
approaches capital markets is thus: “Invest in me, not because I do good,
but because my activities make economic sense!” (Chu, 1997, p. 9) This is
demonstrated by their constant appeal to investors regarding micro-finance’s
favourable bottom line – that it can be profitable.
It thus may be argued that the market solution is not revolutionary in
that the fundamental separation existing within traditional economics (and
the market) between “economic” and “social” is strictly maintained or reinforced, with the economic bottom line remaining the essential measuring stick.
For those who would argue that this is a (if not “the”) fundamental problem,
this strategy is not revolutionary in that this aspect remains unchanged, even
unaddressed. In Lebossé’s terminology, the “unbankable” are made “bankable”
again, as opposed to changing the notion of bankable altogether. In the making of a new “alternative microenterprise financial system,” questions such as
why traditional capital markets are not “suited” for micro – enterprise in the
first place, of why capital is systematically mal-distributed, are left unasked.
There is no attempt to incorporate social costs or benefits into the understanding of “profit.” On this level, then, the use of capital markets by MFIs
to alleviate poverty is not revolutionary, in that the same essential unequal
and poverty-causing economic structures and market dynamics are simply
applied to a wider population of the poor. The linking of MFIs to the market
could perhaps be stated to represent a quantitative vs qualitative revolution,
but whether this is a revolution at all is important to ask.
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Notes
1.
See Jim Stanford (1999). Paper Boom, The Canadian Center for Policy Alternatives and James
Lorimer and Co. Ltd; Linda Quaig.
2.
ACCION International created the guarantee fund, the Latin America Bridge Fund, allowing affiliates
to borrow directly from local banks, dramatically increasing their pool of capital for microloans, and
effectively linking microenterprise with the formal banking sector.
3.
Of course, other positions taken include the need to resist the market altogether, or to dismantle or
transform it directly, but here I am focussing specifically on uses of the market to address poverty.
However, some of these positions will surface in the Discussion section, as critiques of the above
stances.
4.
“Anti-” in the sense of the market being problematic, not in the sense of not using the market as a tool.
The “anti-market” perspective is rooted in Karl Marx, Karl Polanyi, and other social philosophers and
social movements.
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Édifice Le Delta I, 2875, boul. Laurier, bureau 450, Sainte-Foy, Québec G1V 2M2 • Tél. : (418) 657-4399 – www.puq.ca
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Économie et Solidarités, volume 35, numéros 1-2, 2004
© 2005 – Presses de l’Université du Québec
Édifice Le Delta I, 2875, boul. Laurier, bureau 450, Sainte-Foy, Québec G1V 2M2 • Tél. : (418) 657-4399 – www.puq.ca
Tiré de : Économie et Solidarités, vol. 35, nos 1-2, M. J. Bouchard, J. L. Boucher, R. Chaves
et R. Schediwy, responsables • EES3501N
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